When do you pay Income Tax?

Source: HM Revenue & Customs | | 03/10/2018

Income Tax, unsurprisingly, is a tax on income. To be more specific, it is a tax on the income of individuals and non-incorporated businesses. However, there are some types of income where no Income Tax is payable. We have summarised below some of the main
income type that are and are not liable to Income Tax.

In most circumstances, taxpayers will not be required to pay tax on all their income, even if it is all taxable because they receive a tax free Personal Allowance (2018-19: £11,850). There are a number of variables that can affect the amount of the Personal
Allowance such as claiming the Marriage Allowance, which can increase the amount of the allowance. Taxpayers earning over £100,000 may see their Personal Allowance gradually reduced or wiped out.

The following lists show the main income types that are and are not taxable.

Taxable income includes:

Earnings from employment

Earnings from self-employment

Pensions income

Dividend income

Rental income (unless using the rent-a-room scheme)

Trust income

Interest on savings over your savings allowance

Certain state benefits (including the State Pension).

Non-taxable income includes:

The first £1,000 of income from self-employment

The first £1,000 of income from property you rent (not applicable if using the rent-a-room scheme)

Income from tax exempt accounts such as Individual Savings Accounts (ISAs) and National Savings Certificates

Dividends from company shares within the dividends allowance (£2,000 for 2018-19)